Saturday, April 25, 2009

ETF Rewind - Week 17 (04/24/09)

(Click Image to Enlarge/ Glossary)

We finally saw a pause in the recovery incline, but only by a touch with the S&P500 (SPY) ending the week down just -0.5%. However, the NASDAQ100 was able to post a seventh week of gains at +1.1%, leaving it just -1.0% below its 10-month moving average.

The weekly trade was highly news driven, starting with fresh bank nationalization fears (Deal.com - Stressed Out), followed by a flood of earnings and economic reports, merger and acquisition happenings (Register - Oracle Sun)(NYT - Pepsi Bottling), and ending with the release of the "stress-test" methodology (WSJ - Water Torture). You can see the wide range this put the market through in the RSI charts below.

Other equity indices joining the NASDAQ100 in approaching their long-term averages are Emerging Markets (EEM), Consumer Discretionaries (XLY), and, naturally, Technology (XLK). Although four week recoveries in these sectors have been dwarfed by those of Financials (XLF) and Real Estate (IYR), up +16% and +26% respectively, note how far those two have yet to go before moving back into bullish territory.

Week Eighteen of 2009 features another heavy earnings and economic calendar, including a Federal Open Market Committee statement out Wednesday, as follows:

Looking at Price Index readings for next week, the market remains slightly overbought, particularly in the Materials (XLB), Industrials (XLI), Consumer Discretionary (XLY), and Technology (XLK) spaces. It will be interesting to see how these overbought reading play against strong Relative Strength in these very same areas. On the flip side of the coin, Treasuries (TLT) and the US Dollar (UUP) look relatively oversold. A recipe for rotation on the right news flow? Enjoy Your Weekend!

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